IMF and the PNP doing a great job of ruining Jamaica.

June 13, 2013  I wrote the following

What if the IMF prescription fails ?

How will we know that we are taking the wrong medication ?

If we eventually are smart enough to recognize that the medication is not addressing the underlying problem for the patient (Jamaica), is there another set of “medication?

What is the alternative ?

Is their a plan, should the IMF prescription fails ?

Yesterday,  we heard a member of EPOC , Mr Ralston Hyman, suggesting that at least one part of the IMF prescription is failing.

The finance minister, Dr Damien King, the IMF have all said that a sliding dollar is not necessarily a bad thing and in fact its great news for exporters and could result in significant benefits for our exporters.

Since the policy of rapid decline in the dollar being facilitated by the PNP government, we have not seen a rise in exports, in fact the exact opposite has occurred, with exports down 34% !

That number is astonishing, but despite that, the government appears set to have a target of  $120: 1  for the exchange rate US$ vs J$.

I am not an economist, I consider myself however to be able to look at data, analyze that data, create a mathematical model and then come to some logic conclusion based on the data and that is general my approach to many things.

Over the last 40+ years,  since in 1970’s when Manley placed us into the clutches of the IMF, we have not been able to successfully prevent these vampires from sucking the life blood out of this country.

We started a devaluation policy from back then despite various ways used to “manage” the exchange rate and the so called big boost to exports, have not materialized up now. We keep saying ” a lower dollar will boost exports” and points to the what appears to be a logical explanation for this long held belief. We point to other countries around the world, where this policy actually works and we have continued with it for 40 yrs, despite the fact that there is no data to show that policy works in Jamaica.

As someone who spends a little time researching ( wish I had more time) if your data collection, analysis, mathematical modelling and conclusion arrived at, from that work, does not match present or historical trend, it means one thing and one thing only.

It means there must be one or more other variables that have been missed or the impact of these variables have been over or understated in the mathematical modelling (assuming your actual data is good)

In that case what would be required is not the typical text book formulas at this stage, instead what you do is start from the actual results , work backwards and develop a model using all the various variables and then arrive at a mathematical formula that matches that actuality.

You finally verify that model by inputing various variables at different years at see if the formula holds true within whatever margin of error you may choose to use. Once it holds true you then move to a predictive mode using hypothetical numbers for the various variables and see where it leads.

I have no idea why economic models that work elsewhere do no work in Jamaica, but I strongly suspect that reason is our research lack a full understanding of the dynamics of the Jamaica economy and seems unable to grasp or even arrive at a close and realistic estimate of the “underground” or informal economy, coupled with the fact that we do seem able to estimate the impact of energy prices on how we do business.

The problem with every researcher is we all have basises , we operate mainly in sphere where we are comfortable, we look at data we are familiar with and we then make some general assumptions based on our knowledge, expertise and experience.

There is a missing formula for the Jamaican economy, the PNP does not know it, have not known it, does not care to know it, so long as they can provide a ” a likke work here and a likkle work there” and do enough to win the next election.

If the solution to Jamaican’s problem was the PNP then Jamaica would be sailing and we would  have been experiencing economic growth and development.

If the solution to Jamaica’s problems was the IMF, then the issues we faced today would have long been corrected and the country would have been experiencing growth.

The fact is the PNP does not understand the economy, the leader is clueless and most of the cabinet ministers are operating outside their areas of expertise, resulting in expensive experiments along the way, which has cost Jamaica dearly.

The people don’t appear to know the difference between announcement vs achievement and  economics vs politics  resulting in our decisions being based on a set of variables that are intangible and cannot be measured.

Jamaica is headed no where and the PM is working , working, working to get us there in a hurry.

Jamaica is headed in the wrong direction and that is a FACT !


7 Responses

  1. Devaluation as a tool of economic policy will not work in Jamaica. We need to stop this madness. You can’t plan and make projections when tomorrow the dollar is not where your plans said it will be. We need to take a page out of a country like The Bahamas. Their dollar has been 1 – 1 for as long as I can remember.

    Portia is a failure, as if we didn’t know that, and we are feeling the effects. Bitter medicine or not, the patient is dying.

  2. I have long said that this devaluation method is madness. Our dollar has been devaluing for over 40 years and other export have not risen in that period. In fact, when over dollar was stronger than the USD our production and exports were higher than what it is now.

    • I curious…who is devaluing the dollar? Is their one individual, group of individuals devaluing the dollar? Isn’t it simply market forces at work or are you saying the GOJ or the BOJ is responsible? I think more than ever in our history, too many companies/individuals are chasing the mighty US $. We have so many companies in Jamaica today that earn a lot of their revenue in Jamaican dollars and the need to convert to US is what is causing the rapid devaluation. Do you agree?

      • Our lack of production and export is causing the devaluation of the JAD. But how do we produce and export more?
        The factors mitigating against this are:
        Energy cost
        Skilled labour
        Government policies

        Are we addressing these or simply doing everything the IMF is telling us to do.

      • If it was “normal” simply market forces as we are being led to believe under the economic theory of supply and demand, the IMF, the BOJ or any other entity would not need to say “the dollar is overvalued, you need to let it slide another 8 – 10% to $120:1”.

        If it was simply economic the dollar would always be at its correct value unless their is attempted to artificially prop up the dollar.

        Market speculation as a result of lack of confidence in the local economy can result in devaluation, but right now the devaluation is being used as a tool to reduce import and prop up export, which is something that has never worked in Jamaica.

        There is one theory, which says the value of the dollar is contingent on the level of inflation between the host country ie Jamaica and its largest trading partner ie the USA.

        So to get parity between the US$ and the $J, the local currency must move an amount which is the difference between the inflation rate in USA and JA.

        The problem with this theory is it never will hold true for the simple reason being that as soon as the devaluation begins, the inflation rate in Jamaica moves up. The net effect of this is before the dollar reached the “parity” value based on the differences in the exchange rates between both countries, it would have shifted even further thus always keeping the J$ overvalued and the need to devalue further.

        So its like a dog catching its tail, you really never catch up.

        Try telling that to comrades !

        • Hmmm, I was always under the impression that you were a comrade. What gave me that impression?

        • Really, you must be the only person on this blog who would have thought so !

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